Can RoboAdvisors Change Investment Behavior to Achieve Financial Goals?

BrightTalk conference - June 23rd, 2016

Can Robo-Advisors change investment

behaviour to achieve your

financial goals?

April Rudin The Rudin Group

Paolo Sironi IBM

Greg B Davies, PhD Centapse

David P Wilson Capgemini

2

Paolo SironiIBMThought LeaderWM FinTech Analyticsauthor “FinTech Innovation: from Robo Advisors to GBI and Gamification”

Greg B Davies, PhDCentapseFounder Specialist in behavioural finance and decision science

David P WilsonCapgeminiHead of Strategic Analysis Group at Capgemini Financial Services Founder of thewealthconsultant.com

April RudinThe Rudin GroupCEO Wealth marketing solutions

Welcome toour webinar

http://thewealthconsultant.com

3

Conversation withDavid P Wilson

(Capgemini)

Automated Advisors BrightTalk Conference

June 24, 2016

2 Copyright © Capgemini 2016. All Rights Reserved

20160623_BrightTalk Webinar_Automated Advisors_v1.0.pptx Follow discussion at #WWR2016 Download Full Report at www.WorldWealthReport.com

We celebrate the 20th anniversary of the WWR

Impact of New Market Realities on

HNWIs Changing HNWI

Behaviors

Mid-Tier Millionaire Challenge

Offshore vs. Onshore Capital

Flows

Globalization and Wealth

Transfer

Change and Innovation in

Private Banking

Needs- Based Client

Service Models

Ultra-HNWIs

Meeting Needs of Growth Markets

Institution- Like HNWI Behaviors

Specialized Products and

Strategies

Adapting to New Market

Realities

Europe vs. North America HNWIs

Change in Investor Psyche post Crisis

Leveraging Enterprise Value

Developing Scalable Business

Models

Regulatory Impacts on WM Firms

and their Clients

Addressing Evolving Role of Wealth

Manager

Digital: The New Wealth

Management Mandate WWR 2016 20th Year

Anniversary

Digital Maturity Remains an Elusive

Goal



By 2025, HNWI wealth projected to be ~3x 2006 levels

3.5 8.4 17.4

42.1

4.4 11.2

16.6

25.7

5.0

10.1

13.6

19.9

2.2

5.1

7.4

11.7

1.1

1.4

2.3

4.4

0.4

0.9

1.4

2.3

0

20

40

60

80

100

120

1996 2006 2015 2025P

HN

WI F

inan

cial

Wea

lth

HNWI Wealth Growth 1996–2015 2006–2015 2015-2025P

Total 37.2

Total 58.7

Total 106.0 54.9%

106.4%

47.5%

34.3%

61.7% 44.3%

57.5%

Middle East Latin America

North America

Asia-Pacific

Europe

Africa

Global 65.5%

142.0%

54.4%

46.2%

92.0% 58.4%

80.7%

HNWI Wealth Projection, 2006, 2015, 2025P (by Region)

Source: Capgemini Financial Services Analysis, 2016

248.1%

397.0%

277.5%

171.8%

109.3% 235.4%

253.4%

Total 16.6



Industry executives foresee significant disruption for the next 10 years

Source: Capgemini Financial Services Analysis, 2016; WWR Executive Interviews, 2016

Key Areas of Future Trends in Wealth Management

CLIENT

OPERATIONS

REGULATORY

DIGITAL



Current wealth industry digital maturity will not be sufficient to tackle digital demand and disruption

Average Digital Maturity Score of Wealth Management Firms Across Enterprise, Advisory, and Client Parameters

Source: Capgemini Financial Services Analysis, 2016; Global HNWI Insights Survey 2016, Capgemini

3.6

3.4

3.2

3.1

3.0 2.9

3.0

2.9 3.5

2.5

2.0

3.5

3.3

2.8

3.0

2.0

Enterprise Culture

Enterprise Capability

Advisory Engagement

Advisory Productivity

Advisory Capability

Client Capability

Client Experience

Wealth Firm Score Third-Party Analyst Score

Enterprise Vision



Digital maturity’s importance is going to increase as HNWIs increasingly embrace new FinTech offerings

49%

76% 70%

52% 48% 46%

33%

67%

80% 77%

64% 59% 61%

68%

0%

25%

50%

75%

100%

Global Asia-Pacific (excl.

Japan)

Latin America

Japan Middle East and

Africa

Europe North America

2015 2016

(%)

Source: Capgemini Financial Services Analysis, 2016; Global HNWI Insights Survey 2016, Capgemini; Capgemini and RBC Wealth Management Global HNW Insights Survey 2015; Capgemini Wealth Manager Survey, 2016

47.5% 48.4% 59.1%

34.8% 46.4%

69.1%

39.3%

13.3% 11.4%

11.9%

17.4%

13.0%

11.3%

18.1%

12.3% 11.0%

12.9%

15.8% 11.2%

8.5%

15.9%

12.4% 8.9%

9.5%

20.1% 13.3%

6.4%

17.0%

14.5% 20.2% 6.7% 12.0% 16.1%

4.7% 9.8%

0%

25%

50%

75%

100%

Global North America

Asia-Pacific (excl.

Japan)

Japan Europe Latin America

Middle East

& Africa

Never

Once or Twice an Year

Quarterly

Monthly

At Least Weekly

HNWI Propensity to Use Automated Advisory Services

HNWI Current Frequency of Usage of Peer-to-Peer Advice Forums



Wealth manager engagement and FinTech collaboration can enable digital transformation

High-Level Digital Prioritization Roadmap in Wealth Management

Core/Strategic Focus Transformation Focus

Shift the business mindset Develop ROI model/ cross-enterprise support

Make build vs. buy decisions

Implement quick wins to build momentum

Develop big data opportunities

Partner/ collaborate with FinTechs

Engage wealth managers to test, improve, and launch programs

Additional Recommendation for 2016 Strategic Recommendation from WWR 2014 Transformation Recommendation from WWR 2014

Note: Steps do not necessarily need to be taken sequentially Source: Capgemini Financial Services Analysis, 2016; WWR Executive Interviews, 2016

2016 www.worldwealthreport.com

WORLD WEALTH REPORT

12

Conversation withPaolo Sironi

(IBM)

13

Long term equation: “FinTech Innovation”

Robo-Advisors ( TECH innovation ) + Goal Based Investing ( FIN innovation ) + Gamification ( behavioural change ) ———————————————— = personalisation of personal finance

Robo-Advisors

Automated investment solutions which:- engage individuals with digital tools- featuring advanced customer experience- to guide them through a self-assessment

process- and shape their investment behaviour- towards rudimentary goals- and provide automated rebalancing- using trading algorithms based on passive

investments- and portfolio diversification.

nor Advisors

neither Robo

good example to explain how to digitalise Retail and Private Banking

15

It is not gold all that glitters

Something BAD

1. Over-simplified on-boarding

2. Not enough risk & goal based

3. Not holistic approach

Something GOOD

1 . investing for the long term

2. portfolios not just products

3. lower costs

16

Progressive industry shift towards 2020

to channel of

portfoliosadvice driven

from channel of

productssales driven

GBI is a gravitational system: space (risk/return), goal (time)

fee

return

risk

fee

return

risk

Digital WMTraditional WM

What changes for advisors and investors

WHAT DOES IT MEAN FOR ADVISORS?

from PEOPLE’S GOALS

to PORTFOLIOS

to PRODUCTS

WHAT DOES IT MEAN FOR INDIVIDUALS?

MAKE YOUR AMBITIONS RIGHT

Learning trough experiences

What is a good ambition?

Why should I stay the course while markets drop?

How can my investment actions affect long-term portfolio returns?

Market crash

negative rates

high inflation

booms and busts

job loss

health concerns

Cognitive Gamification

20

Investors’ bias

Conversation withGreg P Davies, PhD

(Centapse)

1

@GregBDavies [email protected]

Dr Greg B Davies Founder, Centapse

Centaur Advice Man plus machine for better decisions

Fluid Intelligence

Less wealthy half Wealthier half

Expense Substantial

Small

Your car is having some trouble and requires £X to be fixed You can pay in full, take a loan, or take a chance and forego the service at the moment...”

Chart adopted from Anandi Mani, Sendhil Mullainathan, Eldar Shafir, Jiaying Zhao (2013). Poverty Impedes Cognitive Function. Science. Vol(341): 976-980.

Human Capital (future income)

Goals (Future

Liabilities)

Asset Debt Funding

Financial Debt Funding

Ne

t V

alu

e

Crystallised Goals

Savings & Investments

Future Wealth Current Wealth

4

Investment

Savings

Insurance

Spending

Planning

Total Investment Portfolio Multiple Investment Pots

Knowledge Engagement Comfort Examples

Disclosure Little, or none None None

Caveat emptor

Disclaimers

Traditional Education

Little, or none Little, or none Little, or none Seminars

Classes

Nudges None, or negative

None, or negative Some

Auto-enrolment

Defaults

Engaged Choice

Yes Yes Yes

Just in time education

Gamification

Behavioural Design

Digital Technology

Data Analytics

Thank you

Can Robo-Advisors change investment behaviour to achieve your financial goals?

April Rudin The Rudin Group

Paolo Sironi IBM

Greg B. Davis Centapse

David Wilson Capgemini

THANKS